Bosch India

Submitted by conclave E 12 Simon Mohsin Jonas Noel Surojeet Bosch India Bosch is a direct provider of engineering science and attends in the beas of self-propelled and industrial technology, consumer goods and building technology in India. The Bosch Group ope order in India through vi companies, viz, Bosch Limited, Bosch Chassis Systems India Limited, Bosch Rexroth India Limited, Robert Bosch Engineering and Business Solutions Limited, Bosch self-propelling Electronics India Pvt Ltd, Bosch Electrical Drives India Pvt Ltd.In India, Bosch set up its manufacturing direct room in 1953, which has grown all(prenominal) turn up the old age to allow 13 manufacturing sites and seven teaching and application centres. The Bosch Group in India employs all e very(prenominal)where 25,000 associates. In India, it generated con self-coloredated revenue of over Rs. 11,300 crores in 2011. Bosch Limited is the flagship acquire with of the Bosch Group in India. It earned revenue of over Rs. 8000 crores in 2011. The stemma organization domains of Bosch include self-propelled technology, Industrial technology, Consumer Goods and Building Technology, and Engineering and IT proceedss.Vision Creating Value, overlap Values. Mission To improve the character of lifetime with Bosch products and enabling customers by maximizing foster as an offshore partner in technology and business solutions. ENVIRONMENT see free- enc stick outprise(a) structure of manufacturing The machine Components orbit in India registered a hefty product rate of 36. 3% as comp aredto 30. 6% product rate in FY2010. The revenue festering in the national help self-propelling section barter good deal be attributed to the reduction in fall duties on certainvehicles and the grant of vitamin C% contrasted putment funds in the part sector.However, poor merchandise sentiments, sum upd victuals & angstrom unit fuel prices and interest rates took their toll, what with th e cut-rate sale of passenger cars in October 2011 locomote to the worst in two grades forcing the constancy to slash forward looking for forecasts. The widening price differential in the midst of petrol and diesel motor has further favoured the consider for diesel cars. This notwithstanding, OEMs continued to launch saucily models in all market segments specially passenger cars.Overall, the carmotive sector was able to sustain double digit yield aided by a solid performance in the first half(a) of the year 2011 and partially aided by stable rural demand. Factors affecting the industriousness Economic * The railway car accessary manufacturing has been one of the alacritous ripening sectors in the Indian economy. It has a CAGR of 24% over the last 5 years. It had a sale of Rs 1600 billion in the year 2010-11. * energy utilisation rates of the railroad car appurtenant sector as a completely decreased signifi behindtly in decipherable of sickend exports andslowdo wn in the house servant markets. The patience players had to grapple with the issues of extreme unpredictability in rupee and input live and as a consequence, tremendous pull was witnessed on margins. * In stipulations of foreign trade, the auto shares industry grew rapidly in twain exports and imports over last 5 years. Political * The government has taken legion(predicate)initiatives to promote foreign contract coronation (FDI) inthe industry. * cable carmatic approval for foreign equity investment upto 100% of counterbalance of moves and office parts is permitted. * The automobile industry has beende-licensed. There are no restraints on import of constituents. * To discover the necessary activities, the DHI ( teaching of Heavy Industries) has setup the Development Council for automotive and Allied Industries (DCAAI) * The Governments infrastructure initiatives much(prenominal) asthe Golden Quadrilateral ramble and NHDP (National High stylus Development Progra m) superfluousively soak up anindirect favorable effect on the industry. Technological The auto components industry is a very technology-intensive industry. Historically, Indias strength in exports has lied in forgings, castings and plastics.But this is changing with much component manufactures investing in up gradation of technology in new years. The organised sector has increased centre on quality and has been recommended setting up of an auto design centre at National Institute of Design (NID), Ahmadabad. The DHI has recommended the beingness of a Rs 1000 crore modernization/automotive learning. ACMA has too spoken about a similar fund. Social Social milieu is intrinsically linked with automobile sector and has changed the demand to the tune of preferences of customers in major way. 1.Business is booming asthe Indian mettle sectionalisation is change magnitude its consumption. 2. The increased managementing on on environment sector has also resolving military for ceed in companies researching in developing split to use energy efficaciously and reduce carbon emissions. 3. Also more(prenominal) and more companies are getting ISO 14001 certification (Environment guidance System). 4. Entry of global players has also necessitated a change in the organisation culture. Competitive position of Bosch India Core Competencies Bosch core dexterity revolves around developing racy class innovative products and achieving salute leadership.For that it invests heavily in R& angstromD and counselling on a lean efficient system in passing agonistical environment of auto component sector. With investments in R&D, Bosch is able to focus more on cleaner and stinting product. Also with economies of scale and skilled, educated men of India, it is able to reduce cost. 1. High merchandise Share With a market grant of almost 95%, it has a virtual(prenominal) monopoly in the diesel Fuel blastoff Equipment. 2. Technological competencies a. Manufactures modern gaso depict and diesel engine systems of high quality, cleaner and efficient. . Diesel Fuel Injection Equipment (FIE) has been the core business of Bosch Ltd. , right from its inception in 1951. c. immediatelyMICO (Motor Industries Co. Ltd. , a Bosch association) continues to be a supplier of FIE to a majority of Original Equipment Manufacturers (OEMs) with a market share of over 81%. d. MICOhas also earned a place for itself, in the Bosch world, where it has been identified as center of Competence for Single Cylinder pumps, Multi-Cylinder Inline (Aand P type) and Distributor pumps (Mechanical and Electronic type). 3.Alternative Energy MICO Bosch is abject towards energies such(prenominal) as electricity age also improving existing top executive train technologies, including diesel systems, gasoline direct injection and hybrids to reduce the energy from formal resources. It has also taken up bio diesel and CNG technologies to address energy challenges. 4. Service In India 50 per cent of Boschs authoritative business is accounted for by the diesel segment. Bosch positions itself as a one-stop shop for sales and service and to make available the entire scat of products to those who write out for service.Bosch is expanding the product range in this business by bringing around of its global technology products into India. It is also proviso to manufacture some of these products in India. A CORE COMPETENCY CENTRE has been created in the terra firma to manufacture these equipments in the MICO employment complex. 5. Quality MICO Bosch has ISO Certified Quality perplexity System. Certified Locations are MICO, Incorporated MICO europium ltd. and MICO Mexico. Sources of Competitive Advantage 1. The company is highly centralised by the head bunss in Germany. The head traces keeps things firmly under arrest.Strategic departments such as Research and Development, Corporate Identity, Production, procure and External affairs are found in Stuttgart and dictated to the worldwide subsidiaries. change are only when operational departments bid Personnel, Sales or Accounting. Furthermore, decisions given to righteousness of subsidiaries are mostly of operative quality only. 2. Based on the business strategy that complies with the value chain and support activities, the company holds the emulous advantage of selling products at a price radically less(prenominal) than the offer of its competitors. . Global R&D hub Over the years, focus on producing innovative products with continued R&D has led to many firsts bid ABS, EPS, PAS , FIE etc and thus has provided free-enterprise(a) edge in industry. 4. Large Contact Base MICO has a large supplier and customer pocketbook and maintains a farseeing term kin with them. VRIN Analysis of Strategic capabilities Bosch capabilities satisfy the pastime 4 conditions 1. Valuable Boschs expertness to manufacture high quality diesel and gasoline systems provide cleaner and economi cal alternatives, thus adding value for the customer. . Rare Bosch has pioneered the R&D in these technologies, and trunk highly innovative to differentiate its products. around component manufacturers fall into stage triple and Tier IV. Bosch is one of the rare Tier I manufacturers. 3. Costly to Imitate Bosch also has been building these capabilities over many years. great R&D investments proscribe others to imitate Boschs Technology. 4. Non-substitutable In this technology-intensive industry, having high quality and efficient products is the only way to gain competitive advantage. Opportunities and ThreatsBased on the in a higher(prenominal)(prenominal) place abbreviation of the immaterial and competitive environment, we can identify the opportunities and threats as follows. Opportunities 1. Domestic Investments and developing a. The size of the Indian automotive industry is expected to grow at 13 per cent per annum to reach around US$ 130 billion to US$ cl bill ion by 2016. b. The demand growth at 14% CAGR makes India one of the fastest evolution markets. c. Though Indias auto component industry has conventionally relied on exports for its profits, the domestic market itself is ripe with rapidly growing opportunities. . Industry experts are hopeful that the country will be able to equipoise China and other Southeast Asian countries traditional manufacturing advantage in the plan of attack years, facilitating the industrys achievement of its targeted market value of US$ 40 billion by 2014. e. During the quarter ended June 2009, all be as a percentage of sales rich person seen a decline except for power, rock oil and fuel cost. afflictive material costs rescue contributed the maximum to gain in margins as these costs bring in come down from 63. 3 per cent in March 2008 to 57 per cent in June 2009. . The relaxation of FDI norms for the small-scale sector could release as one of the key growth drivers in the long run. g. With invest ments around US$ 15 billion slated for the sector over the next few years, the prospects for Indias auto market look very bright indeed. 2. considerable Labour Force a. With 400,000 engineering graduates every year, out of which 7 million enter the workforce, there is a huge tack of labour force. b. Skilled labour costs in India are also among the lowest in the world. 3. Linked to Automobile SectorThe opportunities for the industry are also tied to the fortunes of the automobile industry. As the Porters quintet Forces Analysis showed above, auto manufacturers hold the sterling(prenominal) influence. a. The automobile sector is cyclical and dependent on the growth of the economy and improvement in infrastructure. Factors desire increased worldly concern spending, favorable interest rates and universal improvement in per capita income point towards higher demand for automobiles in the future. b. There has been a conscious effort by auto manufacturers to improve productivity of their suppliers (i. e. component providers) in the past few years. Though the depend of active vendors has declined portentously for auto manufacturers, technology transfer and fresh fund infusions have contributeed in improved productivity in the remaining ones. c. The growing Chinese automotive market also presents attractive business opportunities for automotive component manufacturers for exports. Threats 1. Lower Margins a. extremely competitive Margins are likely to come under pressure in the long term because as opposition increases, auto manufacturers will find it difficult to increase prices and will try to cut costs.The nucleus will eventually fall on auto supplementary players. b. Consolidation As manufacturers sourcing components are keen to get components from less sources in future, this will lead to desegregation in the sector. Companies will have to focus on quality and abide by delivery schedules if they want to survive. 2. Trade Agreements The growing numbe r of Free and Preferential trade agreements being signed by India with countries like Thailand, Singapore and other ASEAN countries will detriment the cost competitiveness of Indian companies as Indian players play significantly higher duties than their Asian counter part.Therefore, Indian companies might lose out on big orders if the profession structure is not rationalised. Competitiveness & Position of Major Rivals The Company is operating in a highly competitive market which may exerts pressure both on the top line as well as the bottom line of the company. The market structure is break for a large number of ancillary products. The acquit profit fell 11. 5% year-on-year to Rs 247 crorein the quarter ended June 2012 on rebellion depreciation cost. Its competitor Motherson Sumi has late acquired Peguform and Visiocorp and Vivek Chaand Sehgal and the acquisitions have reaped good returns so far.Its genuine turnover stands at Rs 15,000crore. WABCO India has reported a sale s turnover of Rs 249. 29croreand a net profit of Rs 41. 84 crore for the quarter ended Jun 12. The slowdown in auto sales is having a cascading effect on ancillary units forcing them to to cut ware as inventories have started piling up imputable to demand slump. Bosch is not the only auto component supplier to curtail production. another(prenominal) companies such as Mother Sumi Systems, which supplies parts to Maruti Suzuki, have also seen a angle of dip in demand.According to Automotive Component Manufacturers association of India, growth of auto component industry is expected to slow down to 6-7% this year compared to 14% in 2011-12. As the growth is likely to be less, this might result in companies getting more competitive to get deals in their hand. Following are the few competitors of Bosch Ltd Name Last toll Market Cap. (Rs. cr. ) Sales Turnover sack up Profit Total Assets Bosch 8,734. 75 27,426. 15 8,162. 06 1,122. 56 5,035. 57 Exide Industrie 151. 85 12,907. 25 5,111. 02 461. 17 3,057. 32 Motherson Sumi 160. 95 9,462. 9 3,587. 46 317. 17 2,152. 70 Amara raja Batt 224. 30 3,831. 32 2,371. 03 215. 06 907. 54 WABCO India 1,629. 25 3,090. 29 1,045. 64 153. 40 529. 97 Amtek India 100. 15 2,771. 91 1,886. 62 151. 25 3,758. 02 Amtek Auto 88. 40 1,949. 64 2,368. 56 288. 13 7,533. 64 Federal-Mogul 204. 85 1,139. 62 1,151. 48 37. 46 569. 03 Wheels 745. 80 736. 06 2,077. 54 34. 35 555. 58 Sundaram-Clayton 185. 45 703. 51 1,033. 94 61. 17 620. 78 Automotive Axle 381. 90 577. 13 1,012. 49 57. 56 305. 65 Banco Products 65. 95 471. 67 559. 63 72. 43 417. 1 Jamna Auto 117. 20 462. 78 955. 58 42. 84 272. 62 PORTERS FIVE FORCES abstract Porters 5 forces and analysis of the competitive environment in this sector Threat of new entrants (Moderate) 1. De-licensing has opened the market new entrants. 2. However, there are relieve many barriers to entry for the auto components market. initial capital is very huge in the organised market restricting small players. 3 . Technology and quality demands are very stringent. 4. As OEMs constitute the largest customer segment, component manufacturers get into strategic long term relationships, esp. or high value items. 5. other advantages to existing players include customer service and distribution network. We can conclude that threat of new entrants is moderate. negociate power of suppliers 1. Raw material cost comes to 50-60% of the total production cost. 2. Suppliers to the auto component sector include companies from the electronics, fabrication, plastic and rubber, casting/forging, machine tools industries. 3. Bargaining power is low for high technology products. 4. Unorganized sector dominates the domestic component market due to excise benefits. Generally, excess supply persists.Bargaining power of customers (High) Bargaining power of customers is very high. The demand for auto ancillary products in linked to automobile demand. strike is derived from OEMs Low Margin Largest Demand, Stringen t Requirements backup man Market High Margin front line of Small competitors with cheaper prices exports High Margin change magnitude Demand, Focus on Quality This way 1. The OEM market is very competitive and component manufacturers have to compromise on margins to base bulk orders. 2. Moreover, delivery schedules and quality standards have to be adhered to very strictly.Companies operating in the export market face controversy at a global level. Export demand is linked to the increasing borrowing towards outsourcing. In light of increased competition in the global market and repletion situation, large auto manufacturers faced significant pressure on margins. Moreover, the imperative to invest in new product development increased. This resulted in global majors increasing budget for outsourcing of components in order to spell cost. Threat of Substitutes (Low) The only substitutes to auto component manufacturers are organised component players operative closely with RampD teams of OEMs.However, this threat is very low. The unorganised components market faces a greater threat as replacement market consumers are unsteady to genuine components. Rivalry among Competitors (Moderate) Competition is moderate. At the domestic level, market structure is fragmented for a large number of ancillary products. Most companies adopt low cost and differentiation strategies. In some products (like batteries), only two or three companies control over 80% of the market. Competition in coming period is expected to intensify, as global players enter the market leading to consolidation.The dereservation of Small Scale Industries will result in access to capital and technology. outer FACTOR EVALUATION MATRIX cay External Factors Weight Rating Wtd marking Opportunities Human Capital 0. 10 3 0. 30 Labour Cost 0. 10 1 0. 10 Domestic investment and growth 0. 05 2 0. 10 free burning Improvement of Products 0. 10 3 0. 30 New Product Opportunities 0. 05 3 0. 15 Festiv e season 0. 05 4 0. 20 Threats Regulatory insecuritys 0. 10 2 0. 20 Input cost and inflation 0. 10 1 0. 10 Currency risk 0. 05 1 0. 05 Lack of demand 0. 0 1 0. 10 Growth of Auto component sector to drop to 6-7% 0. 05 2 0. 10 Labour Strikes 0. 15 1 0. 15 Total 1. 00 1. 85 The charge score of EFE matrix is 1. 85. The score shows that the company is not very effective in taking advantage of the existing opportunities along with minimizing the potential adverse effects of external threats. References 1. http//www. boschindia. com 2. www. moneycontrol. com 3. News Article http//online. wsj. com/article/SB10001424052748703909804575122832895561158. hypertext mark-up language? mod=WSJ_latestheadlines 4. http//www. bosch. com